A 'wall of inflation' is heading towards the UK as a record rise in costs for British factories points to an 'inevitable' spike in the cost of living for British consumers, new data shows.

British manufacturing companies grew at a decent clip in January, with activity hitting its highest in nearly three years, but their input costs shot to a record high as a result of the post-Brexit weakened pound and rising oil and commodities prices.

Despite a ‘strong start’ to 2017, price pressures have intensified for manufacturers, according to the latest Markit/CIPS UK Manufacturing purchasing managers’ index.

Manufacturing: Output hit a 32-month high, but factories' input costs rose to a record high

The headline PMI was 55.9 in January, just shy of December’s two-and-a-half-year high, with a reading above 50 indicating growth.

Factory output growth rose to the highest level in 32 month and new orders increased, but manufacturers saw their costs spike to the highest level seen since the data was first collected in 1992.

UK manufacturers have reported rising cost pressures for many months. This is caused by a weaker pound, which is down 13 per cent against the dollar since June’s referendum, but also by rising oil and commodities prices, Markit said.

At the same time, a weaker sterling has fuelled some growth in the sector, as it has made UK products cheaper for buyers abroad, boosting exports.

But Markit said growth of new business from abroad slowed sharply – a sign that the boost to export orders from the weak exchange rate was waning. Growth in output was mostly down to strong domestic demand, according to the report.

Howard Archer, chief economist at IHS Markit, said that the pound’s weakness was a double-edged sword for UK manufacturers.

‘The weakened pound is substantially pushing up manufacturers’ prices for oil, commodities and imported inputs – which is squeezing margins and markedly increasing pressure to hike prices,’ he added.

Rising inflation: The rise in input costs for manufacturers is an indication that prices for consumers will 'inevitably' rise this year

Jeremy Cook, chief economist at international payments company World First, said: 'The devalued pound and increased commodity costs are hurting companies that are both part of a supply chain or standalone exporters of goods and products and while some of this is being passed on, we worry about consumption fatigue in the longer run.'

He pointed to World First data on currency hedging which suggested that 75 per cent of the hedges that small UK importers and exporters put in place before the referendum in June last year had expired on the first of January.

'This leaves them exposed to the devalued sterling and provokes necessary price rises. The SMEs that will drive the government’s international trade vision are now starting to feel the effects of the Brexit vote and so will the UK’s consumers.'

Inflation rose to a two-year-high of 1.6 per cent in December, but experts agree that by the end of this year it will likely 3 per cent.

The headline PMI was 55.9 in January, just shy of December’s two-and-a-half-year high

Despite the rise in costs, Markit's data showed that confidence among manufacturers rose to an eight-month high in January. Almost 51 per cent of respondents said they expected output to rise over the next 12 months, reflecting new market opportunities and planned product launches.

All firms boosted their staff levels, but small and medium companies did it more than larger companies.

David Noble, chief executive at the Chartered Institute of Procurement & Supply, said: 'The ongoing boost in staffing levels, recorded for the sixth consecutive month, showed SMEs with the largest appetite for expansion, though larger firms also increased employment.'

Overall, manufacturing is likely to make a 'solid' contribution to UK GDP from manufacturing during the opening quarter of 2017, according to Markit.

However, forecasters see the UK economy slowing down in the next couple of years, even though the world economy will become more robust.

The National Institute of Economic and Social Research today revised up its forecasts for UK growth to 1.7 per cent this year and 1.9 per cent in 2018, which is better than it previously thought but lower than last year's 2 per cent growth.

NIESR also predicted an increase in consumer price inflation, which will hit consumer spending, but ruled out a rise in interest rates by the Bank of England, which will announce its decision on Thursday.